Monday, August 1, 2011

E-filing: The Easier Way

It is difficult to part with your hard earned money in taxes and could even more be pinching if there is hardship in filing the return. No wonder some say that while the government taxes your earnings, filing the tax return taxes your mind!

While the thrust continues to be on simplification of income tax (IT) return, IT Department has also introduced a convenient way to file these returns online, saving the hassles of long queues and handling stacks of documents. It means filing your tax returns electronically through the internet. This is catching on fast and more and more tax payers are making use of e-returns.

With the due date for filing the IT return, i.e. 31 July, fast approaching, many people are contemplating shifting from the old fashioned method of filing paper returns to the contemporary method of electronic filling.

Pre requisite for e-filing

As a prerequisite, you are required to pay all your due taxes before you can proceed to file the IT return. Unlike the traditional process of payment of taxes in cash or cheque at the designated bank branch, you may also choose to pay taxes online using net banking facility. On successful payment of online taxes, a printable acknowledgment, similar to the challans provided by the banks, is generated. The details of the acknowledgment / challan are required to be mentioned in the IT return.

Once the taxes have been paid and all the relevant income details are available, the next step is to fill the applicable IT return form.

Selection of correct IT return form

The IT return has to be filed in the correct form which is determined as per the source of the earnings of the individual or HUF. Below is the description of various IT return forms:

Form Category of person Applicability

ITR 1 Individual o Income from Salary or Pension, and / or

o Income from One House Property (excluding loss brought forward from previous years), and / or

o Income from Other Sources (Excluding Winning from Lottery and Income from Race Horses.

ITR 2 Individual / HUF Where total income does not include any income under head " Profits and Gains of Business or Profession"

ITR 3 Individual / HUF Individual / HUF who is a partner in a firm and where income chargeable under head "Profits and Gains of Business or Profession" does not include any income other than income by way of interest, salary, bonus, commission or remuneration received from the firm

ITR 4 Individual / HUF Where income is being derived from business or profession under a proprietorship

You can access the website wherein all the tax return forms and utilities to file online return along with proper instructions are available.

The user may download the return preparation software for the selected form from the IT department website or may alternatively use the software available in the market for this purpose.

The user will then need to input his income / tax details in the IT form. The IT form should then be verified using the tools available therein.

The forms require personal information like the name, address, PAN, date of birth etc details of tax payment challans, etc for your income earned during the year.

Procedure for filing your IT Return

The process of e-filing begins by accessing the website

Every new user has to register his Permanent Account Number (PAN) at this website and create her / his account.

An automated link is sent to the e-mail address mentioned at the time of registration. The account at the IT website can only be activated by clicking the link received via email.

An XML file can be generated using the ITR form downloaded from the IT website on just click of a button. The generated xml file then needs to be uploaded on the webpage by logging in to the website.

Successful Completion

On successful upload, an acknowledgement in Form ITR V is generated. The acknowledgment is also automatically emailed to the e-mail address mentioned in the tax return form. This is required to be printed and signed manually. Alternatively, the return may also be filed using digital signatures. The signed acknowledgement has to be sent to the Central Processing Centre, Bangalore by ordinary post within 120 days of filing the return online.

The e ase from E -filing

With this new method of filing the return, there is no constraint on space and time as the return can be filed from anywhere in the world provided the internet facility is available. So, even if the return is being filed on the last day, one need not worry about waiting in a long queue to submit the form, thereby saving time and effort.

Moreover, it offers great accuracy as the calculations are processed electronically. In case any error is observed while filing the return, the same can be revised easily. The advantages with e-filing are far greater than its disadvantages and e-filing will be a favoured option in the years to come.